Luxury fashion conglomerate Tapestry (NYSE:TPR) announced better-than-expected revenue in Q1 CY2025, with sales up 6.9% year on year to $1.58 billion. The company’s full-year revenue guidance of $6.95 billion at the midpoint came in 1.1% above analysts’ estimates. Its GAAP profit of $0.95 per share was 7.5% above analysts’ consensus estimates.
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Tapestry (TPR) Q1 CY2025 Highlights:
- Revenue: $1.58 billion vs analyst estimates of $1.53 billion (6.9% year-on-year growth, 3.7% beat)
- EPS (GAAP): $0.95 vs analyst estimates of $0.88 (7.5% beat)
- Adjusted EBITDA: $315.3 million vs analyst estimates of $291.9 million (19.9% margin, 8% beat)
- The company lifted its revenue guidance for the full year to $6.95 billion at the midpoint from $6.85 billion, a 1.5% increase
- EPS (GAAP) guidance for the full year is $4.88 at the midpoint, beating analyst estimates by 19.8%
- Operating Margin: 16%, up from 13.8% in the same quarter last year
- Free Cash Flow Margin: 7.2%, up from 5.3% in the same quarter last year
- Locations: 1,376 at quarter end, down from 1,420 in the same quarter last year
- Constant Currency Revenue rose 8% year on year (0% in the same quarter last year)
- Market Capitalization: $16.1 billion
StockStory’s Take
Tapestry’s Q1 results were driven primarily by continued momentum at its Coach brand, with management emphasizing the brand’s strong customer acquisition, especially among Gen Z and Millennials. CEO Joanne Crevoiserat highlighted that new customer growth and higher average unit retail (AUR) contributed to both revenue gains and margin expansion. The company also pointed to operational discipline within its direct-to-consumer model and margin improvements, achieved through both product innovation and a more agile global supply chain.
Looking ahead, Tapestry’s management attributed its increased full-year guidance to ongoing strength at Coach, a disciplined approach to marketing investment, and tariff mitigation strategies. CFO Scott Roe stated that incremental tariffs are expected to have an immaterial impact on the rest of the year, citing preemptive inventory actions and a diversified manufacturing base. Management also reiterated its commitment to investing in brand building and digital experiences, while remaining cautious given the complex external environment.
Key Insights from Management’s Remarks
Tapestry’s management credited Q1’s performance to brand momentum, especially at Coach, and to operational improvements that enhanced profitability. The quarter also featured strategic shifts in marketing and ongoing supply chain adaptation.
- Coach brand acceleration: Coach delivered double-digit gains in leather goods, with the Tabby and New York families outperforming, driven by product innovation and strong demand from younger consumers.
- Gen Z and Millennial focus: The company acquired over 1.2 million new customers in North America, with two-thirds from Gen Z and Millennials, and saw higher retention rates among this group, supporting longer-term growth.
- Digital and omnichannel growth: Digital revenue grew at a mid-teens rate and comprised about 30% of total revenue, while brick-and-mortar also expanded, both contributing to improved margins.
- Kate Spade brand reset: Management acknowledged continued pressure at Kate Spade, with a revenue decline and ongoing repositioning efforts targeting brand awareness, streamlined assortment, and less promotional activity to enhance future brand health.
- Supply chain and tariff strategy: Tapestry responded to global trade shifts by diversifying production—70% now sourced from Vietnam, Cambodia, and the Philippines—and pulling forward inventory to minimize tariff exposure, actions that supported margin expansion.
Drivers of Future Performance
Management’s outlook is shaped by sustained brand momentum at Coach, continued investment in marketing and digital, and the ability to navigate global supply chain challenges.
- Brand and product innovation: Tapestry expects ongoing Coach product launches and storytelling to drive both demand and pricing, with Gen Z engagement seen as a key lever for future growth.
- Marketing and digital investment: Increased marketing spend and omnichannel experiences are designed to reinforce customer loyalty and sustain margin improvement, though higher expenses may offset some gains.
- Tariff and supply chain resilience: Management emphasized that proactive inventory management and a diversified supplier base reduce risks from tariffs, but noted ongoing global trade dynamics as a potential headwind.
Top Analyst Questions
- Ike Boruchow (Wells Fargo): Asked what is driving Coach’s recent outperformance and whether brand momentum can be sustained; management attributed it to brand connections, supply chain agility, and compelling value.
- Lorraine Hutchinson (Bank of America): Inquired about the potential impact of tariffs in 2026; management responded that mitigation actions and supply chain flexibility should limit exposure, but they will not sacrifice innovation or quality.
- Matthew Boss (JPMorgan): Sought details on new customer acquisition and retention; management pointed to intentional efforts to attract younger customers and highlighted rising retention rates among Gen Z.
- Michael Binetti (Evercore ISI): Queried gross margin drivers and the sustainability of recent AUR growth; CFO Scott Roe cited operational efficiency and innovation, while emphasizing continued focus on value.
- Brooke Roach (Goldman Sachs): Asked about unit volumes and the balance between AUR and unit growth; management indicated that unit growth should follow as brand positioning strengthens and promotional activity declines.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will closely follow (1) Coach’s ability to maintain customer acquisition momentum, especially among Gen Z and Millennials, (2) progress on the Kate Spade brand reset and its impact on sales trends, and (3) the effectiveness of tariff mitigation strategies as global trade policies evolve. Additional attention will be paid to digital and omnichannel growth as Tapestry continues to invest in customer experience enhancements.
Tapestry currently trades at a forward P/E ratio of 15.1×. In the wake of earnings, is it a buy or sell? See for yourself in our free research report.
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